In this episode we dig into his background to unearth just how geology and property aren’t so dissimilar after all. He shares his thoughts on the green revolution and the part he plays in it, the fascinating facts behind mining for minerals, and how his foray into property was the natural step for him to take at this point in his life.

Timestamps:
01:41 | Geology Rocks
02:27 | A Day in the Life
05:30 | Digging Deeper
10:18 | Mining and Minerals
16:01 | Rough but Tough
17:35 | An Involved Process
27:21 | Property Journey
30:37 | This Calls For a Spreadsheet

 |

01:06 | A Different Approach
05:36 | Gearing Up
07:06 | With a Little Help From His Friends
10:32 | Future Plans
11:45 | Highs and Lows
14:11 | Lightbulb Moments
16:34 | Next Up
20:12 | Get Started

Resources and Links:

[00:32:52] And when I ran it through my spreadsheet, it made a lot of sense. And it was quite an eye opening experience. Because like a lot of people I think, 'You've got to go negative geared', but I didn't even really consider positive gearing. But since then, how things have changed.

This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.

 

I’m Tyrone Shum and in this episode we’re speaking with Dr. Adam McKinnon, a geologist with a passion for Earth sciences. His journey has been a whirlwind of dust and dirt with the occasional golden discovery, but it doesn’t start and end with his career. After years of dealing with shares, he saw capital appreciation in property on the horizon.

Tyrone Shum:   

Dr. Adam McKinnon is a chemist by training, after dedicating his high school and university years to inorganic chemistry. As a manager of a public junior ASX company, he spends his days looking for copper and gold, trying to find Australia’s next big copper deposit.

Adam McKinnon:     

[00:01:41] I went to uni. I was very good at chemistry in high school. And in university, in second year, actually, I took a course in what was called chemical mineralogy, which is the chemistry of rocks, and I absolutely loved it. 

  

[00:01:58] And that's what got me, it was almost a gateway drug into geology. And I ended up getting a scholarship to do a PhD in geochemistry, and also in geology, Earth sciences, which I've been doing ever since for the last few decades.

Tyrone Shum:   

His day begins early, and he greets the sun while running, riding, or walking into it as it rises.

Adam McKinnon:   

[00:02:27] Typically, I get up between 5:00 and 5:30.

  

[00:02:37] And then as an MD of a junior exploration company, I can be doing any one of a number of things. It can range from inspecting our latest drill core to going out to site to visit our guys doing logging out on site. Meeting investors, talking to brokers, writing ASX announcements is a big part of my job. And I also get to travel throughout both Australia and occasionally overseas as well, pretty regularly.

Tyrone Shum:   

For those of us unfamiliar with ASX companies and the differences between the junior and giant leagues, he gives a quick overview.

Adam McKinnon:   

[00:03:20] Our company has a market cap of around $30 million, which is sort of the high end of the junior space. But the ASX has 1,000 to 2,000 companies that have a market cap anywhere between $2 million and $50 million, which is what we call the junior end of the market. 

  

[00:03:40] Resource companies are the biggest number of companies on the ASX. And what we're all basically trying to do is find Australia's next big deposit of any one of a number of commodities— copper, gold, lithium, cobalt, all those things people are talking about at the moment that are required to make batteries, for example.

Tyrone Shum:   

There’s a large demand for the resources he seeks out, whether they be used for batteries or something else entirely. With the rise of the Tesla, this demand is only increasing.

Adam McKinnon:   

[00:04:53] Mining will drive the green revolution. It needs to. There's a lot of copper and rare Earths and lithium and all sorts of other elements that are required to actually build these batteries, wind turbines, and all the other things associated with the green revolution. And I'm glad that I'm a small part of trying to meet that demand.

Tyrone Shum:   

We dig a little deeper into his background, starting in the forest-filled valleys where he grew up.

Adam McKinnon:   

[00:05:30] I mostly grew up in the Blue Mountains, which is in the far west of Sydney. I did also spend a fair bit of time with my dad in country New South Wales, in a town called Bombala, which is in southern New South Wales. But yeah, I've been a Western Sydney boy for most of my life.

  

[00:06:11] One of my earliest memories is actually... 

  

[00:06:15] When I was born, I grew up at the town of Warragamba, people may know that from the Warragamba Dam, which supplies about 80% of Sydney's water. My dad worked for the Water board there. 

  

[00:06:31] One of my earliest memories was going fishing with him in the Nepean River. And it's an area I've loved all of my life. And I've loved fishing ever since I was young, and I love it. To this day. I don't get to do it enough now, but it's something that I picked up from a very young age. So that is actually my earliest memory that I can remember, going fishing at Warragamba with my dad.

Tyrone Shum:   

[00:07:01] That's awesome. I actually haven't been out to Warragamba Dam for a while or out that way and the Nepean River, but is that spot quite fishable? Because I think so much has changed over the years. And I'm not sure if that's the case.

Adam McKinnon:   

[00:07:16] The Nepean River is, yeah, there's still plenty of fish around. It tends to be a little bit inaccessible. Because it's surrounded by National Park. So it can be difficult to get in there. But these days, there's plenty of areas you can go and catch a fish if you want to.

Tyrone Shum:   

McKinnon is an explorer through and through, and he started early.

Adam McKinnon:   

[00:08:42] My parents were separated. So I still went to school in the Blue Mountains. But I spent most of my school holidays down in southern New South Wales with my dad. I went to the local public school in Blaxland, which is a suburb of the lower Blue Mountains, all the way through from year seven to year 12.

 

[00:09:29] I really loved science when I was in school, and I knew I wanted to do something related to science. I was very good at chemistry, obviously. And I chose to go and do a Bachelor of Science at the University of Western Sydney. 

 

[00:09:44] But I never really knew anything about Earth science at the time. It was only serendipity, really, that there was a course offered that allowed me to actually get out and see some old mines. And I was just hooked from then. But I continued on with the chemistry degree and just included the Earth science component of that as well.

Tyrone Shum:   

Painting a picture of what these mines looked like, he begins with their history.

Adam McKinnon:   

[00:10:18] It was out in the Oberon or Bathurst area of New South Wales. It used to be, one area in particular, used to be one of the biggest in the 1800s, one of the biggest copper mines in the Commonwealth. It's completely derelict and abandoned now. And it's just a lot of old dumps, and a lot of old workings, if you will, an old smelter in a chimney stack. And what we were specifically looking at is just what minerals we could see on the surface.

  

[00:11:06] This particular mine basically hasn't operated in over a century now. So but back in the day, that all would have been mined from underground in pretty terrible conditions, mind you, back then. And then a lot of the ore actually got sent all the way back to London for treatment.

 

[00:11:44] Most metals and gold mines process their own material in Australia. Although having said that, a lot of the iron ore mines, for example, they send all of their material— or most of their material— over to one of the Asian countries for treatment. Typically, most of our iron ore products go to China, for example.

Tyrone Shum:   

One question he gets asked often is: What exactly is Earth science?

Adam McKinnon:   

[00:12:33] When you look at rocks, rocks are just inorganic chemicals. So that's where that natural link between chemistry and geology comes in. There is a lot more to geology as well, obviously, landforms and geophysics and things like that. That's separate. But the particular area that I was very interested in was the chemistry of rocks, effectively.

Tyrone Shum:   

[00:13:00] And that's where you stumbled into over that time, because that's when you went to that mine. And you said, 'Wow, this is what I wanted to do'. So I guess I'm curious, like, over the many years, how long did that degree take to complete?

Adam McKinnon:   

[00:13:13] It took a total of seven years to complete, actually, to complete my PhD.

Tyrone Shum:   

[00:13:20] So it's almost as long as a medical degree, or law degree.

Adam McKinnon:   

[00:13:26] Absolutely.

Tyrone Shum:   

When he finally completed his studying, there was no rest for the wicked.

Adam McKinnon:   

[00:13:38] The person who adjudicated on my PhD thesis offered me a job with a company that he was working for. And I pretty much straight away got chucked into the deep end into the mining industry. And within about the first six months of working, I had been on a plane to Broken Hill. And then also working in the Cobar region of New South Wales, which is about 400 kilometres west of Sydney.

  

[00:14:13] Surprisingly, when I first went out to Broken Hill, it was freezing cold, and it was the middle of winter. People don't often associate that part of the world with being cold. But [I] very quickly realised that swings in summer, it's obviously normally plus 40 degrees and then in winter, it can be very, very cold as well. 

  

[00:14:34] I've basically spent most of my career now working in Central Western New South Wales, and it's an area of Australia that I really, really love.

Tyrone Shum:   

With populations of just several thousand people, most of the towns he’s come across have been small but mighty.

Adam McKinnon:   

[00:15:00] Obviously, it's rural or semi rural in most of these towns. A lot of these towns actually only exist because of mining. Cobar is a good example of that. There's no river that passes by to attract anyone. Broken Hill was formed as a mining town. So mining is in the blood of these towns. 

  

[00:15:21] Nowadays, a lot of them have diversified into agriculture. And in the case of Broken Hill, they've even diversified into the arts, actually, there's a big art scene in Broken Hill, for example

Tyrone Shum:   

Being thrown in the deep end of the mines— not literally— turned out to be a double edged sword for McKinnon.

Adam McKinnon:   

[00:16:01] The company that I started working for straight out of uni, very quickly, it's an interesting story. Within a year and a half, I was made redundant. This was right in the middle of the GFC. And a lot of companies were struggling. 

  

[00:16:19] I managed after that to go to work as the only non board employee of sort of a startup company. And during that time, we had a fair bit of success and discovered a small gold deposit. And that's really what kicked off my career. 

  

[00:16:37] I worked for that company for around six years, and then moved to another nearby company and [started] looking for copper and gold, and also lead and zinc. And over the years, I've had a fair bit of success at finding deposits with that company as well. And to the point where I rose through the ranks of that company up into the senior management, and then on to the executive team.

Tyrone Shum:   

While many of us probably panned for gold during school excursions when we were younger, the modern process looks a little bit different to what we experienced.

Adam McKinnon:   

[00:17:35] Obviously, it's fairly involved. But the short answer is we use a whole number of different techniques. We can use things ranging from just simple mapping and going out and looking at the rocks and saying, 'These look like the right rocks'. 

  

[00:17:48] We can use something called geophysics, which uses satellites and other techniques, airborne flights to investigate the nature of the rocks. 

  

[00:17:59] And then the other main technique we use is geochemistry, where we go and sample the soil and sample the rocks and see if there's any signatures of the metals we might like to find. 

 

[00:18:10] When we find an area of interest, then the very next thing we normally do is we put a drill hole down into the ground. Drilling is very expensive. So that's usually the last thing we do. But that's the definitive test to tell you whether there is actually something there.

  

[00:18:49] It's actually more than you might realise. There's actually a whole suite of techniques that allow us to see deep into the earth. And some of them rely on magnetics, some rely on gravity, some rely on putting a current into the ground, and seeing what the response is that comes back. And there's a whole number of other techniques as well, that can be used. 

  

[00:19:15] And some of these techniques, one in particular called seismic can see all the way down through the Earth's crust. So we can see a long way into the Earth using these techniques.

Tyrone Shum:   

[00:19:26] That's amazing. So is it because those techniques also cost a lot more to utilise? And hence the reason why those technologies aren't constantly used? Or is it available for every type of mining company that can use it?

Adam McKinnon:   

[00:19:41] It's not that they cost a lot more, it's more that they can't directly detect whether or not there's gold there. They can tell you a lot about the rocks and they can tell you a lot about the faults and folds and things like that in the ground. But they can't necessarily directly tell you that there's definitely going to be gold or there's definitely going to be copper in that particular area.

Tyrone Shum:   

He’s climbed the ranks in the company he works for in the year he’s been there. In that short time, he’s worked his way up to achieve an upper senior management position.

Adam McKinnon:   

[00:20:45] They were looking for a managing director. And I had had a lot of success defining some of these deposits, and they wanted someone who could find these copper and gold deposits for them. So they invited me to come across as the manager, as the managing director. And we've since had quite a bit of success in the Narromine region of New South Wales.

Tyrone Shum:   

[00:21:14] How did you actually find that area to start off with? Was there some kind of specific area that you were just focusing [on] or this company that you were working with focused on? Or was it just going, 'Okay, we need to find a particular resource. And this is where we're just going to spread our wings and go for it'?

Adam McKinnon:   

[00:21:32] We knew it was in the right rocks, because there'd been some drilling there before that had shown indications of copper and gold mineralisation. And what we did is we followed up some of this earlier work. And really, we drilled into some really quite nice copper and gold mineralisation. And we've pretty much been drilling at this spot for the last seven or eight months now.

  

[00:22:12] The type of deposit that we're looking at is one of the main sources of copper worldwide. It's called a Porphyry deposit. And it accounts for about 60% of all of the copper production in the world. 

  

[00:22:25] These deposits are typically very large, and can be massive, they are the biggest deposits in the world. And generally, they range from around 100 million tonnes all the way up to several billion tonnes of ore.

Tyrone Shum:   

With at least 100 million tonnes of ore on the line, it’s far from a quick process.

Adam McKinnon:   

[00:22:55] We are only at the exploration phase at the moment. If we were to define a[n] economic deposit, then you could expect it to take quite a while to actually get a mine up and running. In Australia, it takes anywhere between three to 10 years to get a mine operating. And then these types of mines can be operating for decades. They have very long life minds.

 

[00:23:37] There's a huge risk to committing to drilling out these deposits. But the rewards are potentially massive. And that's what investors and gold prospectors have done for time immemorial. They spend a lot of effort in the hopes that they will hit that bonanza, so to speak.

Tyrone Shum:   

He’s incredibly grateful for all he’s been able to achieve in his line of work, and gives credit to several factors.

Adam McKinnon:   

[00:24:17] I've pretty much worked for four companies in a two decade career now. And look, I've been very, very lucky to have had some success actually finding some of these deposits. Some geologists— not through any fault of their own— will go their whole careers without ever discovering a deposit. 

  

[00:24:38] So there is a little bit of luck involved. It's somewhat hard work, and somewhat lucky in that sense, but I've been lucky enough to discover or been a part of discovery of a couple of those deposits now. And it is quite exciting. It's a very dynamic and exciting industry to be in.

Tyrone Shum:   

He explains how discovering deposits impacts the company he works for and share prices.

Adam McKinnon:   

[00:25:34] At our end of the ASX company scale, that's exactly what we're hoping for. As you would be aware, as a company that's not actually producing anything, we're just looking for new deposits, we don't have any income. 

  

[00:25:51] So if I put it into property terminology, what we're after is a capital gain. We have no income, we have no cash flow, so to speak. Our cash, it comes from the investors who are investing in our company, hoping that we will give them a big capital gain once we make a discovery.

Tyrone Shum:   

[00:26:10] And that's what you found recently, isn't it, that you mentioned that there was a discovery there?

Adam McKinnon:   

[00:26:17] We're still in the process of investigating what we've got. We obviously had a pretty big share price rise, more than doubling on the discovery. But as I mentioned before, it's very dynamic, and lots of moving parts about why a share price might go up and down, including things like the global markets, and also metals prices, general sentiment, risk appetite, all that kind of thing.

Tyrone Shum:   

After digging into the depths of his career, we switch tracks to discuss his dive into property.

Adam McKinnon:   

[00:27:21] Our first property, like most people, was actually the property we bought as our home, my wife and I, that was in 2010. At the time, we were quite extended when we bought the house. And we had a loose plan— or I had a loose plan— that I wanted to pay it off within seven years. And the way I was going to do that was by dumping all our spare money into the offset associated with a mortgage. 

  

[00:27:51] Now, in that time, our two girls came along. So that plan blew out a little bit. But we did actually manage to pay it off in 2020. 

  

[00:28:05] And I guess that's what precipitated my property journey. Even though it's not been a particularly long journey to this date, I got to a point where I went, 'Well, I'm not going to leave my money in the bank, it's effectively losing money in real terms if I just leave it in the bank. I'm not putting it on the offset anymore. And I'm used to saving all this money each month with each pay. I need to invest it'.

 

[00:28:35] Over the years we've had some experience investing in shares, particularly in some of the companies that I've worked for. And even for companies that I worked for, I couldn't predict which direction the share price is going. 

  

[00:28:51] I'd been impressed with the capital appreciation in our house. And I thought, 'Look, we probably need to get into property. It's going to be the best long term and safest stable investment for us looking towards our retirement in 15 [to] 20 years' time'.

Tyrone Shum:   

[00:29:12] That's excellent. And I guess, maybe, just paint a picture. What kind of house did you buy back in 2010 for your family home?

Adam McKinnon:   

[00:29:20] We bought a four and a half bedroom, brick house built in the 1960s in the suburb of Blaxland, where I went to high school in the Blue Mountains. I think at the time we paid about $460,000 for it back in 2010. Obviously we've seen very significant capital growth on it since then. 

  

[00:29:45] We also did a fair bit of work on it at the time, we spent about $70,000 or $80,000 renovating it, rendering, changing out kitchens, all that kind of stuff. So it's now fully renovated and it's a really nice place to live. It's a really nice area to live.

Tyrone Shum:   

The way he started echoed a familiar sentiment: ‘I'd love to invest, but I don't know where to start or where to go'. However, his unique approach sorted him out quickly.

Adam McKinnon:   

[00:30:37] I do what I normally do when I have a problem like this, I build a spreadsheet. So I'm one who likes to model everything. And that just comes from probably my scientific training, but also my business training with the companies I've worked for. 

  

[00:30:54] So I built a spreadsheet. And I pushed it out for 15 years, I built it so that it would evaluate costs, cash flow, capital gains, depreciation, and in particular, the tax implications for both my wife and myself. So it was thorough. 

  

[00:31:12] The first thing we looked at, I thought, 'Well, if I enter a property investment...' and I looked at a Sydney property, around $1 million Sydney property, negatively geared, we can afford that. But I had exactly the same problem. [I was] talking to my wife and we agreed, 'Yeah, this is something we should do. But we've got absolutely no idea what suburb to look for [or] even what type of property to look for'. 

  

[00:31:45] So from there, I actually called up one of my mates from high school who was a property valuer in the area. I said, 'Do you know any good buyer's agents? I guess I want to get into a property and I've got no idea where to start'. 

  

[00:32:00] He said, 'I don't know any buyer's agents per se, but I do know someone who does positively geared investments. Aiden Collier, over at the Linder group'. So I said, 'Okay, I'll go and meet with them'. I ended up going and meeting with Aiden and Kimberly Linder. And I was very impressed actually with Kimberly's story. I think you may have even had her on the podcast previously.

  

[00:32:31] So she ran me through her personal story and some of her clients' success using basically dual income builds and then piggybacking a number of these purchases together. 

  

[00:32:52] And when I ran it through my spreadsheet, it made a lot of sense. And it was quite an eye opening experience. Because like a lot of people I think, 'You've got to go negative geared', but I didn't even really consider positive gearing. But since then, how things have changed.

A Different Approach

Tyrone Shum:   

McKinnon knew quite a number of property terms before he began his journey, which is fairly uncommon. However, uncommon is his standard way of doing things! Despite not having a background in property, a lot of the concepts were familiar to him thanks to his years in the mining sector. For the concepts he wasn’t familiar with, well, he had a plan for those, too.

Adam McKinnon:   

[00:01:06] Over the years, a lot of these things are not just interchangeable with property, but with other things, especially in the business that I was operating. A lot of these cash flow, capital, all that kind of stuff [were] very important for a person in senior up in the mining game to understand these types of concepts. 

  

[00:01:28] Over the years, I'd investigated the concept of potentially buying a property. The house next door to us actually came up at one stage for sale. And I built a model then as well. And I looked at it, and we didn't go ahead, because I was a little bit risk averse. And we weren't really concentrating on potentially building a portfolio at the time, we were more concentrated on paying down our existing mortgage.

  

[00:01:54] There [were] a lot of things I didn't understand. And I've got a really good accountant that I can just ring up and say, 'I don't understand this, can you just explain what this means?'. 

  

[00:02:09] Just going to the ATO website, for example, is another good place to go if I had an idea and I didn't know whether I could use it or not. That's another place. And then it's also pretty important to have a good conveyancer or solicitor as well, I found. They've answered some of the other questions that I wasn't sure about, particularly in regards to contracts and things like that.

Tyrone Shum:   

Nearly three years after he started his foray into property, his portfolio looks significantly different than when it began.

Adam McKinnon:   

[00:03:16] We settled on our first block in North Richmond, actually, in December 2020. And then within the next 12 month period, we'd actually signed on to develop seven properties over four different blocks. So by seven properties, I mean it was a mixture of both duplexes and dual key properties. The key there is they're all dual income. 

  

[00:03:46] So at the moment, three of those have been completed. And another six properties, seven including our own house. So three of those are completed and three are still in construction at the moment.

  

[00:04:20] Four blocks of land. So two dual key properties. This will be a completion four dual key properties, and...

  

[00:04:30] Two dual key properties and two lots of duplexes.

Tyrone Shum:   

[00:04:35] Two lots of duplexes. Okay, that makes sense. And when you purchased them, they were all empty blocks of land and you were building on every single one of them?

Adam McKinnon:   

[00:04:47] Some of the blocks weren't even registered. So that's another story. Some of them were. Our first two blocks were registered, or were existing blocks, but we've also through the Linder group sourced some blocks in the Maitland area in particular that were registering at a later date. And we're developing those now as well.

Tyrone Shum:   

Purchasing them in that short timeframe would have required a substantial chunk of change for deposits.

Adam McKinnon:   

[00:05:36] And this is the great thing. We obviously, having paid off our house in its entirety, we had a large amount of equity sitting in our primary place of residence. 

  

[00:05:49] And what really attracted me to this positively geared strategy is I actually didn't even need to touch my own cash. So we funded the first couple of builds pretty much with equity from our house. And then the next couple were a little bit delayed, because the registration was at a later date. And still, in that time, we had capital gains on the properties that were completed. And basically, it was a rinse and repeat exercise. 

  

[00:06:20] We were very lucky with timing, mind you, but we've seen a massive capital gain, even on the land. There's one particular block in Maitland that Kimberly sourced for us, I think we paid a $13,000 deposit. And in that time, it added nearly $200,000 in capital value. So, a lot of good luck in that. But I mean, you got to be in it to win it, so to speak.

Tyrone Shum:   

Starting a property journey is never easy, but McKinnon had some helping hands.

Adam McKinnon:   

[00:07:06] One of the key things for me, that goes maybe to mindset a little bit, is that I put a lot of faith in my models, my modelling and my financial models. I took a lot of confidence from the fact, number one, that the Linder group knew what they were doing, suggesting these properties. But also that my modelling of these properties, even if things went bad, were still good investments. 

  

[00:07:34] So we signed on to three of these properties without seeing them. And in fact, two of them, it was nearly two years before we actually physically saw either of them. So we signed on sight unseen.

  

[00:08:15] Obviously there was a little bit of jitters around how everyone in the media was saying it was gonna be an apocalypse in the housing sector during COVID. We still went ahead, we decided that the risk wasn't as bad as everyone was saying and, look, we're absolutely glad we did. Because it went the other way. 

Tyrone Shum:   

He crunches the numbers to determine where his portfolio is sitting, value-wise.

Adam McKinnon:   

[00:09:23] At completion of the ones we've got under construction now, our total portfolio value, including our in house will be somewhere in the order of $6 million. And the LVR on that's around 60%. And a lot of that is due to capital appreciation in the two years since we've signed on, basically.  

  

[00:09:53] Obviously rents at the moment, especially for new houses [are] absolutely phenomenal. The areas that we built in Newcastle, Maitland, North Richmond [have] very, very low vacancy rates. And we're getting fantastic rental returns on all those properties that have finished. And it looks like we'll get fantastic rents on the ones that are being built at the moment as well.  

  

[00:10:22] From those seven properties over four blocks, we're looking somewhere like $220,000 in rental returns each year.

Tyrone Shum:   

[00:10:32] Does that mean that you don't need to work anymore?

Adam McKinnon:   

[00:010:38] I wish, I wish. 

  

[00:10:39] We have a 15 year plan. And the idea is that we want our property portfolio to set us up for retirement, early retirement [at] around 55 or something like that.

Tyrone Shum:   

When it comes to worst investing moments, McKinnon is far from immune. Although the overall process has been gliding along as expected, he’s dealt with some rocky journeys outside of his work as a geologist.

Adam McKinnon:   

[00:11:45] We actually have in a relatively short period. 

  

[00:11:51] We've had a relatively smooth run, guided through the whole process. Especially the building process, which I didn't know much about, by the Linder Group. 

  

[00:12:02] But one thing in particular, we signed on a fixed price contract for a build. This was in early 2021. Pretty much over the next year to 16 months, that particular builder— who I won't name— raised the fixed price contract price four times. A total of over $120,000.

Tyrone Shum:   

[00:12:35] They can't do that, though, right?

Adam McKinnon:   

[00:12:38] Well, you would think so. But it turns out for various reasons, they potentially can. So that left a very bad taste in our mouth[s], and it obviously erodes the modeling or the financial metrics when you're looking at an investment. 

 

[00:12:59] It was still a very good investment, because we'd had very, very strong capital growth on that block. But we decided to try and break with that builder we weren't happy with. We'd signed other contracts and the builder had honoured the contracts. 

 

[00:13:14] So we decided to get out of that contract. And we've actually gone with one of our other builders that we're using, and they've honoured the fixed price, which has been really great. 

  

[00:13:26] And that was a pretty big learning exercise for me. Make sure you're reading or you're understanding these, particularly these build contracts very, very closely, because there's a lot of outs for the builder.

Tyrone Shum:   

On the flip side, he’s had many moments that have stood out that property is the vehicle for him.

Adam McKinnon:   

[00:14:11] I have had a couple of aha moments through this journey. But I guess the big one for me was when I sat down with Kimberley and she went through what you could achieve. You can achieve both growth and equity and positive cash flow at the same time. I thought, 'Okay', and without ever having to touch your own cash. I thought, 'Oh, that's actually really great'. 

  

[00:14:39] And the aha moment for me was, 'Well, if I can do it with one property, why can't I do it with four or five or six?' And then further to that, 'Why can't I do it all in one go?'. 

  

[00:14:50] So we had signed on to about five of those properties, builds, over three blocks within a period of about two and a half months. So we were very, very aggressive in our business in the middle of COVID, as you mentioned. But we went in very, very aggressively because the numbers added up.

  

[00:15:13] As we know with any sort of investment, but particularly [the] property market, it's about time in the game. And waiting. With no real good reason to wait, I didn't necessarily see a reason to do it. And we went very, very aggressively and picked up those properties very, very quickly.

Tyrone Shum:   

His goal is to build a nest egg for his family so he can retire at his choosing. As with many other facets of his life, he has a plan in place to secure the future of his two young girls.

Adam McKinnon:   

[00:16:34] We've worked out we probably want another three to four properties in the building phase for our portfolio. And then for the remainder of the time, we will just concentrate on paying one property down at a time. 

  

[00:16:50] We've also had a pretty big focus on setting up the ownership structure to maximise particularly the taxation and depreciation benefits. And then we're really letting that compounding nature of capital growth do its work over that period of time. 

  

[00:17:14] I work in a very high stress industry. And there's days when I think, 'I don't want to be doing this for the next 30 years'. So I'm very keen to be in a place where I don't have to work if I don't want to. I want to be set up so that I can enjoy fishing, or going out on my boat and doing the things I'd like to do. So that's where we're aiming.

Tyrone Shum:   

While not a big reader of books, McKinnon is a prolific consumer of podcasts. This way, he can get the same information he would from a book, but with the added bonus of multitasking.

Adam McKinnon:   

[00:18:45] The reason for that is that I can do it while I'm exercising, or while I'm travelling. 

  

[00:18:50] I actually, before we started on this journey, I downloaded just about every Australian property podcast I could find. And in fact, your podcast in particular, I listened to just about the whole back catalogue from a couple of years ago, which was really, really helpful to me. 

  

[00:19:08] And the main reason for that is there's a whole range of different investing styles and thoughts on approaches and all that kind of stuff. And I found it very, very helpful. There's a couple of other good Australian ones as well that I did listen to. But yeah, generally podcasts are where I consume most of my information from.

Tyrone Shum:   

The best advice he’s received along his property journey is more of an overarching concept than a singular piece of advice.

Adam McKinnon:   

[00:20:12] It's really about time in the market. And I actually don't know where I heard that. But when I fully understood that, when I modelled it out, it really is important. It's sort of almost more important than...

Tyrone Shum:   

[00:20:31] Trying to time the market. 

Adam McKinnon:   

[00:20:38] That's probably the best bit of advice I've had.

Tyrone Shum:   

[00:21:07] If you took yourself and met yourself, say 10 years ago, what do you think you would have said to him?

Adam McKinnon:   

[00:21:14] I would have said get started. Probably one of my regrets is our focus on paying down our mortgage without investing. I really think if I knew what I knew now, I would have been investing quite a bit earlier. And I think we definitely could have managed it earlier. Just probably lack of confidence and maybe lack of information about what it all involved.

Tyrone Shum:    

[00:22:01] And looking forward to the future, what do you think you're most excited about? Not necessarily just only about your property portfolio, but just your personal life, your journey, your family? Do you have anything that you're looking forward to in the next five years or so?

Adam McKinnon:   

[00:22:17] A couple of things. 

  

[00:22:17] I'm really looking forward to having these couple of properties we're building up in Maitland completed. They've been delayed last year, mainly due to weather, we had a pretty bad year for weather last year. [I'm] excited to have those finished and generating income. 

 

[00:22:36] We're also planning on building our own house at some stage, using some of the equity we've generated in some of those properties. And that's pretty exciting as well. So looking at two to three years down the track.

Tyrone Shum:   

[00:23:07] Well, Adam, you've achieved so much success. And I really, really love the journey that you've shared with us. And also your story as well. How much of it do you think has been due to your hard work, your intelligence, and also your skill? And how much of it do you think is because of luck?

Adam McKinnon:   

[00:23:24] I like to call it serendipity. I don't know, I just like that word more. But I think that plays a big part in everything you do. [The] right place at the right time, if you like. But I think that hard work puts you on the right place at the right time. 

  

[00:23:44] Hard work opens lots of doors for you. And I would say that without the hard work, you're not going to have the luck.

Thank you to Adam McKinnon, our guest on this episode of Property Investory.